The Health and Human Services Department has introduced many healthcare reform rules and regulations in the last few months. Every time that happens, the media gets involved, and all kinds of articles are written in the Wall Street Journal, the New York Times, and TV network news programs talk about it. All the analysts start talking about the pros and cons and what it means to businesses and individuals.
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The problem with this is that many times, one writer looks at the regulation and writes a piece about it. Then, other writers start using pieces from that first article and rewriting parts to fit their article. The regulations and rules get twisted and distorted when the information gets widely distributed. What shows up in the media sometimes doesn’t truly represent the reality of what the regulations say.
There’s a lot of misunderstanding about what is going on with ObamaCare, and one of the things that I’ve noticed in discussions with clients is that there’s an underlying set of myths that people have picked up about healthcare reform that isn’t true. But because of all they’ve heard in the media, people believe these myths are true. Today, we will talk about three myths I hear most commonly. Not everybody believes these myths, but enough do, and others are unsure what to think, so it warrants dispelling these myths now. The first one is that healthcare reform only affects uninsured people. The second one is that healthcare reform can’t affect Medicare benefits and the Medicare program. And then the last one is that healthcare reform is going to reduce the costs of healthcare.
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Health Care Reform Only Affects Uninsured
Let’s look at the first myth about healthcare reform only affecting uninsured people. In many of the discussions I have with clients, they use several expressions: “I already have coverage so that I won’t be affected by ObamaCare,” or “I’ll just keep my grandfathered health insurance plan.” The last one – and this one, I can give them some leeway because part of what they’re saying is true — is, “I have group health insurance so that I won’t be affected by health care reform.”
Well, the reality is that healthcare reform is going to affect everybody. Starting in 2014, we’re going to have a whole new set of health plans, and those plans have prosperous benefits with lots of extra features that the existing plans today don’t offer. So these new plans are going to have higher costs.
Health Care Reform’s Effect On People With Health Insurance
People who currently have health insurance will transition to new plans sometime in 2014. The insured will be directly affected by this because their health plans are going away today, and they will be mapped into a new ObamaCare plan in 2014.
Health Care Reform Effect On The Uninsured
The uninsured have an additional issue: if they don’t get health insurance in 2014, they face a mandate penalty. Some healthy uninsured will look at that penalty and say, “Well, the penalty is 1% of my adjusted gross income; I make $50,000, so I’ll pay a $500 penalty or $1,000 for health insurance. In that case, I’ll take the penalty.” Either way, they will be directly affected by the healthcare reform. Through the mandate, it affects the insured as well as the uninsured.
Health Care Reform Effect On People With Grandfathered Health Plans
People with grandfathered health insurance plans will not be directly affected by health care reform. But because of the life cycle of their grandfathered health plan, it’s going to make those plans more costly as they discover that there are plans available now that they can easily transfer to that have a richer set of benefits that would be more beneficial for any chronic health issues they may have.
For people who stay in those grandfathered plans, the pool of subscribers will start to shrink, and as that happens, the cost of those grandfathered health insurance plans will increase even faster than it is now. Therefore, people in grandfathered health plans will also be impacted by ObamaCare.
Health Care Reform Effect On People With Group Health Insurance
The last one, the small group marketplace, will be the most notably affected by health care reform. Even though the health care reform regulations predominantly affect large and medium-sized companies and companies with 50 or more employees, smaller companies will also be affected, even though they’re exempt from ObamaCare. Many surveys and polls are starting to show that some businesses with ten or fewer employees will look seriously at their option to drop health insurance coverage altogether and no longer have it as an expense of the company. Instead, their employees will get health insurance through the health insurance exchanges.
Some carriers now anticipate that up to 50% of small groups with ten or fewer employees will drop their health insurance plan sometime between 2014 and 2016. This will greatly affect all people with group health insurance, especially if they’re in a small company that drops coverage. Healthcare reform will affect everybody, not just the uninsured.
Health Care Reform Will Not Affect Medicare
The next myth was that healthcare reform would not affect Medicare. This one is kind of funny because right from the very start, the most notable cuts were specifically targeting the Medicare program. When you look at Medicare’s portion of the overall federal budget, you can see that in 1970, Medicare was 4% of the U.S. federal budget, and by 2011, it had grown to 16%.
If we look at it over the last ten years, from 2002 to 2012, Medicare is the fastest-growing part of the major entitlement programs in the federal government, and it’s grown by almost 70% during that period. Because of how large Medicare is and how fast it’s growing, it’s one of the key programs that ObamaCare is trying to get a handle on so it doesn’t bankrupt the U.S. Medicare will be impacted. The initial cuts to Medicare have already been set at about $716 billion.
Medicare Advantage Cuts And The Effects
Of those $716 billion cuts, the Medicare Advantage program will be cut the most and will see the bulk of the effects. This will increase the premiums people pay for their Medicare Advantage plans and reduce those plans’ benefits.
Increased Medicare Advantage Costs
Many people now choose Medicare Advantage plans because they have zero premiums. When given a choice on Medicare plans, they view it as an easy choice because it’s a free program for them, “Sure, I get Medicare benefits, I don’t pay anything for it; why not.” Now, they will see Medicare premiums climb from zero to $70, $80, $90, and $100. This year, we’ve already seen that with some of the Blue Cross Medicare Advantage plans. It’s going to get worse as we go forward.
Reduced Medicare Advantage Benefits
To minimize the premium increases, many Medicare Advantage plans will increase the copayments, increase the deductibles, and change the co-insurance rates. They’ll push more of the costs onto the Medicare Advantage recipients to keep the premiums down. We’re going to see increased premiums and reduced benefits coming in the Medicare Advantage plan.
Fewer Medicare Physicians
And then, if that wasn’t bad enough, as Medicare doctors begin receiving lower and lower reimbursements for Medicare Advantage people, they will stop taking new Medicare Advantage recipients. We’re going to see the pool of doctors to support people in Medicare starting to shrink unless changes are made over the next five years. So, Medicare will be affected dramatically by the healthcare reform. Everybody’s on pins and needles, waiting to see what will happen there.
Health Care Reform Will Reduce Healthcare Costs
The last one, and probably the biggest myth about healthcare reform, is everybody thinking that ObamaCare will reduce healthcare costs. That’s completely hogwash. Early in the process, when they were trying to develop the rules and regulations, the emphasis and one of the goals for reform was to reduce healthcare costs. However, somewhere along the line, the goal shifted from cost reduction to regulation of the health insurance industry. Once they made that transition, they pushed cost reductions to the back burner. There are some small cost reduction components in ObamaCare, but the real emphasis is regulating health insurance. The new plans, for example, have much richer benefits than many plans today: richer benefits mean richer prices.
Health Care Reform Subsidies: Will They Make Plans Affordable?
Many people hope, “The subsidies will make health insurance plans more affordable, won’t they?” Yes, in some cases, the subsidies will help make plans affordable. But if you make $1 too much, the cheap plans will suddenly become very expensive and cost thousands more over a year. Will a subsidy make it affordable or not? It is subject to debate at this point. We will have to see what the rates look like for these plans.
New Health Care Reform Taxes Passed On To Consumers
Then, many new healthcare reform taxes were added to the system to help pay for ObamaCare. That means everybody who has a health insurance plan, whether in a large group, a small group, or just as an individual, will be taxed to pay for the cost of reform. Healthcare reform adds various taxes on health care that insurance companies will have to collect and pay, but they’re just going to pass it right through to us, the consumers.
The Mandate Won’t Reduce Uninsured Very Much.
The mandate was pretty weak during the initial years of health care reform. The mandate says that everyone must get health insurance or pay the penalty (a tax). That will make healthy people sit on the sidelines and wait for the mandate to finally force them to buy health insurance. People with chronic health conditions who previously couldn’t get health insurance will jump into healthcare at the beginning of 2014.
At the end of that year, the cplans’icost will go up in 2015. I can guarantee that will happen because young, healthy people are not motivated to get into the plans. They won’t see the benefit of joining an expensive plan, whereas the chronically ill people will get into the plans and drive the costs up.
Health Care Reform’s Purpose Is Just A Matter Of Semantics
The last portion of this is one of the key things – and it’s funny, I saw it for the first two years, 2010 and ’11 – one of the key things that was listed in the documentation from the Obama administration was: Health Care Reform would help reduce the cost that we would see in the future if we do nothing today. That was emphasized over and over again. That was how they presented health care cost reduction, which would reduce future costs. It would not today reduce what we would pay in the future if we did nothing about it now.
Well, that’s great; ten years from now, we will pay less than we might have. And we all know how accurate future projections usually are. In the meantime, we’re all paying more today and will spend even more in 2014 and 2015 and 2016. Peo. Tenure is going to be pretty upset about that.
Conclusion
Those three myths that healthcare reform will only affect the uninsured, that it won’t affect Medicare beneficiaries, and that ObamaCare will reduce healthcare costs are just that—myths. There’s nothing to them. You must pay attention to what’s happening with healthcare reform because more changes are coming through this year, 2013. Knowing how to position yourself so that you’re in the right spot to make the best decision at the beginning of 2014 will be important for everybody.
